Does the IRS have the authority to impose a 6694(b) if the preparer furnished documents but did not attend the hearing?

Asked about 1 year ago - Fort Washington, MD

A tax preparer is being targeted for a preparer penalty examination. The IRS initial correspondence with him was vague but they Googled the letter number and found it was for a Preparer Penalty Examination. The IRS asked him to bring all things related to 09&10 from returns to correspondence. ยง6107 states the preparer only has to keep the documentation for 3 years. The preparer raised this issue and the examiner stated he should keep documents "indefinitely" just in case. The examiner told the preparer in so many words the penalty had already been determined. The preparer smelled a rat, sent in the disclosures for 09&10, cited 6107, but wont go into the meeting. Does the IRS has legal authority in the IRC to impose Preparer Penalties because he didnt attend the ambush?

Attorney answers (2)

  1. Richard Gordon Stack

    Contributor Level 13


    Lawyers agree

    Answered . As of late, the IRS has been very aggressive in enforcing the paperwork maintenance requirements of tax return preparers. I represented a tax return preparer against whom the IRS asserted preparer penalties because she did not keep "paper" records verifying that her clients were entitled to claim certain individuals as dependents on their tax returns and to substantiate earned income credits. The preparer instead maintained much of the required information on her computer, in the form of responses to client questionnaires. I argued that in this Digital Age, there is no reason why a preparer should be required to maintain paper records of required information -- to no avail.

    The IRS does not have authority to impose penalties against a preparer merely because he fails to attend an examination; it needs to have a sufficient factual basis for imposition of the penalties. That having been said, the preparer's non-attendance at an examination will not help his cause and may be construed by the examiner as evasive conduct. Based upon what you have stated, however, it sounds like the proposed assessment of preparer penalties against your client is a foregone conclusion because the examiner has made up his mind. Thus, the preparer's attendance at the examination may simply be "kabuki theater." Under the circumstances, your client's best bet may be to file a protest of the proposed penalties with the IRS Appeals Office and hope that he obtains a more impartial, reasonable decision-maker at the "next level." Best of luck to you and your client!

    The answer to this question does not establish an attorney-client relationship. Moreover, this attorney is... more
  2. Evan A Nielsen

    Contributor Level 18


    Lawyer agrees

    Answered . Short answer is Yes. Avoidance is rarely an effective strategy with the IRS. Now would probably be a very good time to get a tax attorney working for you and also keep in mind that whatever you post on this site is not confidential, so it might be a wise move to take the matter offline and pursue it directly with your tax counsel.

    Good luck.

    Evan A. Nielsen is licensed to practice law in California and handles federal tax matters throughout the U.S. The... more

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